How Usage Based Billing Benefits Your Business?

There are a lot of businesses that run on a subscription model, which means they charge for their services on a recurring basis with a fixed plan fee. This is good news for any business that they are able to generate recurring revenue. Nevertheless, this approach to making revenue and managing your business has limitations.

As you can see, this could exhaust you of your resources which are involved in providing these services. It could keep mounting your costs while not providing you with the adequate revenue to cover for those.

The usage based billing could then become quite necessary for your company depending on how pricy the resource being consumed is. For example, if your company is a cloud service provider, and if you are providing VM instances based on a fixed fee and not looking at the consumption of the network bandwidth while using those VM instances, you could have a customer who transmits huge amounts of data to and from one such VM instance, utilizing a lot of your shared cloud system bandwidth. Such a customer will get charged a fixed fee for using the VM.

Your costs for running the cloud instance could grow based on such usage, however you would not have the system in place to measure the network bandwidth usage and charge such a customer for higher usage.

There is another problem associated with the charging of a fixed subscription fee and not taking into account the usage consumption levels. It does not keep your charging of your customer accounts very fair.

As a business, you are charging the same amount to the customer who uses your services less than others who could be using more services. It is like you are charging everyone an equal fee although they are using your services with different consumption rates. Your customers won’t like this. If they get better options where they need to pay less for less usage, they will switch over.

If you are a business that is selling and promoting a service that has consumption of a resource, then you cannot survive for long without enabling consumption billing. The consumption billing when clubbed with subscription billing will take care of the above 2 problems. It will enable you to charge to the clients in a fair way. Also, you are not putting onus on yourself to bear the burden of over usage from your customers. 

The usage based billing (or consumption billing / usage mediation) will allow you to create different offerings or plans, by bundling the usages of various products and price or rate them differently. This promotes innovative pricing models that can help grow your business and your revenue, with the promotion of a fair mechanism for charging.

Essentially, you are promoting the PAYG or ‘Pay As You Go’ mechanism of charging. This means your customers will be paying for their actual  consumption. This will keep them satisfied with your products and services and help retain a higher percentage of your customers for the long run. Your innovative charging plans will help boost your revenue and you will cover any risks associated with over usage.

Incorporating usage based billing or consumption billing or usage mediation into your billing and charging plans is no more optional, it is a necessity in 2024!  Consider EarnBill as billing system which comes along with usage based billing or consumption billing as a built-in feature.